Chapter 7 Means Test

Cerritos Bankruptcy Lawyer Helps You Assess Your Debt Ratio

The means test, which was added to the Bankruptcy Code in 2005, objectively
determines whether individuals qualify for
Chapter 7 bankruptcy protection. It does not apply to businesses or individuals
whose debt is primarily business debt. In order to determine your qualifications
and eligibility, it is important that you work with a Cerritos bankruptcy
lawyer from the Law Office of Raymond J. Seo right away.

Who is eligible for Chapter 7?

A person can be determined eligible by calculating their average monthly
gross income for six months prior to filing for bankruptcy. The income
is then compared with the median family annual income for households of
the same size in the debtor's state of residence. If the debtor's income
is not more than the applicable state median income, the debtor "passes"
the means test and may file under Chapter 7.

If the debtor's annual income exceeds the state median income, a further
analysis is performed, looking at the debtor's calculated ability to repay
all or a portion of his debts over 60 months under a hypothetical Chapter
13 repayment plan.

Calculating Disposable Income

The debtor's disposable income is calculated by subtracting a mix of actual
and standardized expenses from his average income. "Disposable income"
is the amount left over after subtracting all allowable actual and standardized
expenses. If the debtor can pay $6,575 in 5 years or as little as $110
monthly to creditors, a presumption arises that a Chapter 7 filing is
"abusive."

Calculating Median Income

To calculate median income based on family size, the debtor should include
himself or herself, his or her spouse (unless separated), children, and
any relatives for whom he or she provides at least one-half support, whether
or not they reside together. If the debtor has a fiancé/fiancée
with whom he or she has resided as a family unit for a long period of
time, then that person, and any children they support, can be included
in determining family size.

Work with our firm's attorney as soon as possible!

While there are many different means tests available online, it is important
that you contact the Cerritos bankruptcy lawyer from our firm as soon
as possible. Each person's case is different, and each individual deserves
personalized representation. When you work with our firm, we will review
your financial situation and help determine the best course of legal action
for your particular case.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship.